5
Third Quarter 2014
Industry One on One
(Aerospace)
The McLean Group’s John Stack conducts a
one on one interview with Jim Albaugh,
former EVP of The Boeing Company and
CEO of Boeing Commercial Airplanes.
Mr. Albaugh was President & CEO of Boeing's Commercial
Airplanes business unit and a member of Boeing’s Executive
Council from September 2009 through June 2012.
From July 2002 to September 2009, Mr. Albaugh was
President and Chief Executive Officer of Boeing’s Integrated
Defense Systems business unit. Previously, Mr. Albaugh, who
joined Boeing in 1975, held various executive positions,
including President and Chief Executive of Space &
Communications and President of Space Transportation.
He is an honorary fellow of the American Institute of
Aeronautics and Astronautics, a fellow of the Royal
Aeronautical Society, and an elected member of the
International Academy of Aeronautics. Since December 2012,
Mr. Albaugh has been a Senior Advisor to The Blackstone
Group. He is the President-elect of the American Institute of
Aeronautics and Astronautics; a Director of American Airlines
Group Inc., PATS Aircraft Systems and TRW Automotive
Holdings; and serves on other nonprofit organizations’ boards
and is involved in other professional organizations.
Given the current, unprecedented 10 year commercial aircraft
delivery up cycle and record backlogs at Airbus and Boeing, where
do you see the industry going from here ?
I always get nervous saying this cycle is different. One thing about cycles is
that they always come to an end, you just don’t know when. But, I do think
this cycle is different than previous ones. Reflecting on past cycles, they
have all been driven, for the most part, by the US and Europe. This cycle is
being driven to a large degree by Asia and the emerging economies around
the world. IATA believes, and it’s supported by Boeing and Airbus, that
passenger traffic is going to double in the next 20 years and China is going
to overtake the US as a market by 2030.
The other thing driving this cycle are multiple new, fuel-efficient airplanes,
both by Boeing and Airbus, and to an extent Bombardier. I think everybody
wants to have their orders towards the front of that production line and I
think that’s why you’ve seen the huge order books for the 320 neo and the
737 MAX. The single aisle market is being driven by increased traffic and
new fuel-efficient airplanes replacing older inefficient airplanes. It’s also
being driven by a lot of these low cost carriers (LCCs) in emerging
economies. For example, Lion Air, which has a huge order book.
On the twin aisle side, it’s a little bit different. I think that the route
liberalization is fuelling demand for the wide bodies and the new airplane
capabilities - the 350 and 787, the 380 to an extent, and the 777. You know,
connecting pairs that weren’t connected in the past is creating a market and
are supported by the globalization that we’ve seen.
A year or two ago, I would have expected production to level out in 2018 or
2019, but now I’m not so sure as both OEMs are looking at narrow-body
rate increases. I think with the A330Neo and 777X announcements, you’re
going to see airlines getting in line for those airplanes.
What key indicators do you watch that provide insights into the
potential timing of an industry downturn? Are we starting to see any
headwinds?
There are a lot of things that can create uncertainty:
• Complex geopolitical landscape (e.g., Middle East and Ukraine)
• Fragile global economy, especially Europe and Asia
